State on track to match $3.7 billion on contract spending

Halfway through its 2016-18 budget cycle, Kentucky state government has issued $2.4 billion in contracts. That’s nearly identical to the amount of money allocated for contracts in the first year of the prior biennium, so the state appears to be on track to match the $3.7 billion spent on contracts in the most recent two-year budget cycle.

According to information from the Legislature’s Government Contract Review Committee, $1.04 billion in personal service contracts and increases to existing contracts were approved in FY 2016-17. These are agreements between the state and private contractors who perform professional services for state agencies, and many are for a two-year period.

In addition, $1.35 billion was allocated for Memoranda of Agreement (MOAs) in the just ended fiscal year. MOAs are contracts between the state and public or private providers that carry out government functions, and many of them are also for the two-year biennium.

In July, the first month of the new fiscal year, $963.6 million in contracts and MOAs were submitted to the Government Contract Review Committee.

As the last fiscal year closed, state budget officials reported a $152 million shortfall in revenue, and predicted another shortfall in the current year budget.

Soon after the shortfall was announced, Moody’s Investors Service, the credit rating agency, downgraded Kentucky’s credit rating for several types of borrowing, including borrowing for road-building and for local school districts. The downgrade could increase the costs for state-funded projects.

Moody’s said “The downgrade reflects revenue underperformance that will challenge the commonwealth’s ability to increase its very low pension funding levels.”

The spending on contracts in the last fiscal year includes a two-year $106 million contract with Correct Care Solutions, LLC of Nashville, Tennessee. Correct Care will provide medical services to all inmates in 13 institutions operated by the state’s Department of Corrections. The Department also renewed a two-year $20 million contract with Diamond Drugs, Inc. of Indiana, Pennsylvania to provide pharmaceutical services to inmates at 12 institutions.

The Personnel Cabinet renewed a two-year $49.5 million contract with Cannon Cochran Management Services, Inc. of Louisville to provide third-party administration for the state’s self-insured Workers’ Compensation program.

The Department for Behavioral Health, Developmental and Intellectual Disabilities renewed a two-year $21.3 million contract with Louisville-based Rescare, Inc. to operate the Outwood Intermediate Care Facility, an 80-bed facility located in Dawson Springs.

The University of Kentucky added $30 million to a contract with Huron Consulting Services, LLC, a Chicago-based company that provides health-care consulting services to the UK HealthCare system. The two-year contract with Huron now totals $50 million. UK also has a two-year $20 million contract for health care consulting with Deloitte Consulting, LLP of Omaha, Nebraska.

The Department of Education added $2.2 million to a two-year contract with NCS Pearson, Inc. of Iowa City, Iowa, and that contract now totals $17.6 million. Pearson provides statewide academic testing which assesses reading, math, science, social studies, and writing to approximately 150,000 students in the fourth, seventh, and 11th grades.

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